Annual report 2015

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Annual report 2015

Four success factors

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Chairman's statement

Dear shareholders and colleagues,

In 2015, metals and mining companies faced a challenging macroeconomic environment, including lower global demand for steel, unprecedented growth in iron ore production, and volatile exchange rates. Together, these factors put significant pressure on businesses in the sector.

In 2015, Metalloinvest presented an updated Strategy 2023, focused on growing shareholder value, increasing investment attractiveness, achieving higher sales margins and driving improved operating and management efficiency. The targets set out in the strategy are aligned with the current market situation and macroeconomic fundamentals. In the face of increased price volatility, we will be adjusting our strategy implementation plans subject to emerging risks and opportunities, but keeping our key strategic priorities unchanged.

In the reporting period, the Company’s EBITDA declined by 27% to USD 1,432 million, largely as a result of lower EBITDA in the mining segment due to a sizable drop in global iron ore prices. Against this backdrop, the management team focused on deleveraging and maintaining the overall EBITDA margin at above 30%. In 2015, the Company improved its EBITDA margin by 1.8 p.p. year-on-year to 32.6%, thus exceeding its target. Moreover, the Company received strong credit ratings from international rating agencies, which attested to its balanced credit policy and financial stability.

Metalloinvest is committed to corporate governance best practices and the diversity and effectiveness of the Board of Directors is on par with Russia’s leading public companies. The pro-active approach and expertise of the members of the Board of Directors’ and the involvement of individual committees in resolving the most important issues have been instrumental in maintaining growth momentum in these challenging market conditions. I would like to thank all members of the Board of Directors and the Management Board of the Company for their professionalism and hard work in 2015.

Commitment to the principles of sustainable development is another important element of Strategy 2023. In 2015, Metalloinvest continued its social and economic co-operation with the Kursk, Belgorod and Orenburg regions, which has proved its efficacy. To foster the social and economic wellbeing of communities where the Company operates, we implement joint initiatives together with the residents of Stary Oskol, Gubkin, Zheleznogorsk and Novotroitsk, also involving the authorities, NGOs, trade unions, environmental organisations, industry associations and other stakeholders. Metalloinvest continues to support comprehensive programmes in partnership with local and federal educational institutions.

Our effective governance framework, strong qualifications and the co-ordinated efforts of our people, along with consistent progress in implementing our production and investment programmes mean that we can look to the future with confidence.

Yours faithfully,
Ivan Streshinsky
Chairman of the Board of Directors
Management Company Metalloinvest

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